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10/04/2010

FASB Proposed Changes and its Impact on Commercial Real Estate

The proposed FASB accounting changes will have a large impact on the commercial real estate (CRE) market. Sellers, Lessors, Buyers, and Lessees of CRE will all experience the changes differently. A summary of the impact of the proposed FASB changes on the different groups are outlined below:

Sellers- The commercial real estate market has been hit hard by the economic recession. CRE values have declined due to the bad economy. If the proposed changes occur, sellers should expect some stabilization of value due to an increase in demand.

Lessors- The changes will impact the lessors financial statement, but more importantly, will impact the terms of the leases. Lessees will desire shorter-term leases due to the reporting factor.

Buyers- It is already a great commercial real estate buyer's market and with the extension of the SBA fee waiver there are even more reasons to buy now.

The impact of the proposed accounting changes may not have a huge effect in the stabilization of the commercial real estate, but it should help provide some incentives for buyers. This is what the commercial market desperately needs in order to recover.

1 comment:

Hmmm. This reads more like a marketing report. That's not necessarily a bad thing ... what bugs me more is the internal contradictions.

For example, your prospectus for sellers indicates that they can expect an increase in demand. But, your prospectus for buyers indicates that they should already be buying.

The whole point of macroeconomics, and one that as a society we're increasingly forgetting, is that it is a situation in which buyers ought to buy but don't. Many people (not this post) knock Keynes, but they don't have a better explanation for this.